Non-executive directors (NEDs) may frequently be dismissed as freeloading members of the old-boy network, but according to Martin Webster, partner at law firm Pinsent Masons, the role has never been more challenging

"It's not an easy, comfortable position to be in by any means," he says. "When things go wrong in a business, the NEDs are an easy target and are frequently the ones who get it in the neck."

And aside from the traditional duty of acting as a buffer in the sometimes fractious relationship between a company's shareholders and its management team, Webster points out that NEDs are increasingly called upon to advise the executive team on how to negotiate a way through the minefield of regulation.

In fact, evidence suggests that many NEDs now shy away from that challenge. In September 2007, a study conducted by professional services group KPMG found that almost half of NEDs questioned, from a range of publically listed and private UK companies, said they had deliberately limited their involvement in major business transactions, such as mergers and acquisitions, because they feared being sued.

So it's not surprising that NEDs that are prepared to get involved are highly prized. This was part of the reason that investment bank KBC Peel Hunt established the Non-Executive Director Awards in 2006.

The awards aim to celebrate the good work done by NEDs throughout the UK. Graham Durgan, chairman of the Non-Executive Directors Association and, along with Webster, a judge on the Awards panel, says that this year the judges will be placing a particular emphasis on a NED's ability to provide guidance on corporate governance issues.

They will also be looking for strategic vision, solid evidence of any contribution to the financial success of the organisation and a willingness to challenge and influence the executive team. Above all, nominees for the NED Awards must demonstrate a high standard of integrity and ethics.
These qualities are vital regardless of whether NEDs are working for a large, listed company or a small, privately held business.

"Non-executive directors are incredibly important to small and medium-sized enterprises (SMEs), because of the relative lack of
in-house resources in terms of governance expertise and in-depth sector experience," says David Davies, head of corporate finance at KBC Peel Hunt, another member of the juding panel. "They need to be really committed. It's no longer a matter of turning up for the occasional lunch," he adds.

Which brings up the perennial debate over NED remuneration. According to research carried out by  PricewaterhouseCoopers, salaries for non-executive directors increased by six per cent in 2007-less than one-third of the increase for 2005.

In many cases, a salary is topped up with a shareholding in the company. But this can be controversial. Some argue that the NED's independence can be impaired by having a shareholding in a company, while others claim that a NED with a shareholding is more likely to be committed to the role, because of their vested interest in the company's fortunes. Dermot Matthias, senior partner at BDO Stoy Hayward, says it depends on the situation.

"For a smaller organisation, I believe that the latter argument is probably correct. If a NED's shareholding is in any way dominant, then that's clearly unhealthy. But a minority shareholding can be a good way of tying them in more closely to the organisation, as well a way of showing appreciation for the valuable work they do," he says.